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Posted Sun, 10 Apr 2022 16:43:02 GMT by Gmack
Hi there, I have a few questions regarding interest earned through the Nexo platform. I have GBP in my Nexo account which earns interest. It is converted into GBPx on a 1-1 exchange rate between GBP and GBPx. Interest is then earned on GBPx and is paid into my account daily. Upon withdrawal the GBPx is then converted back into GBP and paid into my bank account. Can you show me where I would find the relevant tax legislation that covers this? I can't see anywhere that covers the interest earned on cryptocurrency. Presumably this would fall under income tax. Is there a threshold below which there is no personal tax liability on the interest earned? If for example there was only a trivial amount of interest earned, eg. £1.20, would this still be required to be reported? Many thanks in advance.
Posted Tue, 12 Apr 2022 15:53:13 GMT by Gmack
I meant to ask if there was a tax free interest allowance like there is with fiat currency, the first £1000 in interest being tax free.
Posted Thu, 14 Apr 2022 14:12:04 GMT by HMRC Admin 10
Hi

HMRC does not consider the return received by the lender on Cryptoassets to be interest for tax purposes.

Guidance at CRYPTO61110 - Cryptoassets Manual - HMRC internal manual - GOV.UK (www.gov.uk) on how the rewards are treated.

Thankyou.

Regards.
Posted Sat, 16 Apr 2022 22:21:53 GMT by Gmack
Thanks for your reply. So it's not classed as interest, is it then just classed as income and subject to income tax at whatever income tax band you fall into? Can you point me in the direction of where I will find this info in the crypto assets manual please?
Posted Fri, 22 Apr 2022 15:06:59 GMT by HMRC Admin 11
Gmack, 
Guidance on the taxation of the reward at:
CRYPTO61213
The income will be added to t/ps other income and taxed at the relevant band.
Posted Sat, 23 Apr 2022 17:34:00 GMT by Gmack
Many thanks for your response. From reading the CRYPTO61213, I take it to mean that this would fall under miscellaneous income and as a result there is a £1,000 allowance before any income tax is due on these rewards. This is obviously assuming that there are no other miscellaneous income streams using up this allowance. Is this correct?
Posted Fri, 29 Apr 2022 12:56:18 GMT by HMRC Admin 10
Hi
HMRC does not consider cryptoassets to be currency or money as such it is HMRC’s view that the returns aren’t interest.
HS325 SA helpsheet has more information about miscellaneous income.
Miscellaneous Income for the tax year may be absorbed by the ‘Trading and Miscellaneous Income Allowance’ to the extent the allowance as not been used against a trading income / miscellaneous Income  already.
The allowance is up to £1,000 and is instead of claiming those expenses that you may have had to spend to earn this income.
Thankyou.
Regards.

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